The term next-generation is used a lot in the video games industry but what does it actually mean? How are developers taking advantage of new gaming hardware and what are the challenges and next steps for the industry?

With each new iteration of games console hardware comes the promise of revolutionary game experiences.

When the Xbox 360 launched in November 2005, the then boss Peter Moore said: "Xbox 360 will deliver mind-blowing experiences."

Ahead of the launch of the PlayStation 3 (PS3) Sony gushed: "Gamers will literally be able to dive into the realistic world seen in large screen movies and experience the excitement in real-time."

The reality of course is quite different.

"Each time we have a step forward in games, it feels phenomenal. But when we look back we realise it was just another step," says David Braben, the veteran developer who co-created Elite in the 1980s, and whose studio is now working on a so-called next-gen title, The Outsider.

He says video games are entering their fifth generation of hardware (starting with home computers in the early 1980s) and that developers need to be more ambitious and aim higher with the kinds of stories they want to tell.

In this one sequence at the start of the level we are drawing well over one million polygons.

"The tools we need are still under development, but the technique of story-telling also needs to be mastered.

"We need the Alfred Hitchcock and the Orson Welles of gaming to step forward and lead the industry into a new era. At the moment we have plenty of Buster Keatons and Harold Lloyds."

Braben believes that the industry needs artistic figures who can employ the next-generation of tools to tell stories in new ways and cross the Uncanny Valley.

The Uncanny Valley is a term coined in 1970 by Japanese roboticist Masahiro Mori. He pointed out that as robots, and computer animations of people, get closer to replicating the movements and expressions of humans, the bigger the gulf between them and us seems to be.

Human challenge

Frontier has been working on tools to help cross the Uncanny Valley for more than five years and The Outsider is still more than two years away from completion.

"It will be a game where you genuinely can do different things; you can come at a problem in different ways because you thought of a way."

There is no silver bullet that will solve our problems of tools and storytelling

David Braben

The Outsider's ambitions are to put thousands of characters inside a game, each one unique and displaying "subtle human behaviour".

The company has also been working on an animation system which gives a greater feeling of realism and is more adaptive and less scripted.

These challenges are among the biggest issues all developers are grappling with, along with non-linear story-telling, artificial intelligence, photo-realism, connected experiences and user-generated content.

A new wave of titles for the PC, PlayStation 3 and Xbox 360 hoping to confront these issues are due for release in the coming months, among them Bioshock, Crysis, Assassin's Creed, Mass Effect, Fable 2, Metal Gear Solid 4, Halo 3 and Killzone 2.

Nintendo has stepped away from this debate somewhat, focusing on games which highlight participation.

Power pack

Halo 3, for the Xbox 360, is hoping to be the very definition of next generation when it launches next month.

"We're expanding our ability to empower our fans to really take the game and make it their own," says Brian Jarrard, director of franchise and community affairs at the game's developers Bungie.

Halo 3 will include tools to let gamers edit their own game movies and share them among friends, swap photographs from games, as well as re-build many of the maps the makers have provided, through a feature called Forge.

Jarrard adds: "We want to let our fans do great things. These fans are making really great Halo movies and we're giving them really powerful tools and we're excited to see where they go with that."

The increasing amount of raw power available to developers has made the job of creating immersive, detailed worlds more achievable.

David Braben estimates that today's machines are 20 million times more powerful than the first mass-market games machines of the early 1980s.

Game ambition

One title aiming for "Hollywood realism" is Killzone 2, for the PlayStation 3. A recent demo of the game at E3 in Los Angeles impressed many observers.

Steven Ter Heide, one of the producers on the project at Guerilla, says: "The PS3 allows us to deal with a tremendous amount of data on screen, the amount of polygons on screens, animation, the hit responses."

One level of the game equates to about two gigabytes of data, he says.

Bioshock is aiming to tell more mature stories

He adds: "In this one sequence at the start of the level we are drawing well over one million polygons. There's a lot of processing power needed to pull off these effects, such as motion blur, full-screen anti-aliasing, volumetric smoke."

But throwing more polygons and higher definition textures on to a screen are not going to be enough on their own to create truly interactive experiences, argues Braben.

In 1982 he and Ian Bell created a whole galaxy for Elite on the humble BBC Micro, and all inside just 22K of RAM.

"We have textures on a single rivet in The Outsider that are bigger than 22K," he says.

Braben says the firm is also working on tools that allow for more realistic conversations between the player-controlled character and AI characters in the game world.

And that world will be huge. The ambition for The Outsider is to render a 49 sq km city

But Braben is pragmatic about what can be achieved this generation.

"There is no silver bullet that will solve our problems of tools and storytelling.

"I don't think any of the games we have made have ever matched the ambition we had for them. But that's true of the whole industry.